NEW YORK -- Oil prices fell more than $1 a barrel yesterday after the Department of Energy reported that crude oil inventories rose 1 million barrels last week -- the first increase since Hurricane Katrina struck the Gulf Coast nearly seven weeks ago.
Gasoline and heating oil prices also dropped, despite large declines in gas and distillate inventories, as the report from the Energy Department's Energy Information Administration said demand for these products remains low.
On the New York Mercantile Exchange light, sweet crude fell $1.04 to settle at $63.08 a barrel -- erasing day-earlier gains when the Energy Department forecast a 1.9 million barrel-a-day increase in demand next year.
Yesterday's report suggested that US demand for gasoline and distillate fuels, which include diesel and heating oil, is still lagging. Gasoline demand averaged 8.8 million barrels a day last week, 2.4 percent below the same period last year, while distillate fuel demand averaged 3.9 million barrels a day, 4 percent lower than a year ago.
The report also said US refineries were operating at 74.9 percent capacity, about 5 percent more than last week, leading to increases in gasoline and distillate fuel production.
Heating oil for November delivery fell nearly 2 cents to settle at $1.9969 a gallon, and November gasoline fell nearly 7 cents to finish at $1.7579 a gallon.
Prices could surge again, however, if it appears that US consumer demand is recovering faster than supplies are -- a race that oil traders are following closely, said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
''If demand is relatively weak, why are we falling on supplies? It indicates that the loss of production is impacting supplies, and if demand starts bouncing back like some people think, we're going to have problems," Flynn said.
Crude oil inventories climbed 1 million barrels to 306.4 million barrels in the week ending Oct. 7 from a week earlier, the EIA said. Crude stocks are about 11 percent higher than they were a year ago.
Gasoline inventories fell 2.7 million barrels to 192.8 million barrels, nearly 6 percent lower than year-ago levels.
Inventories of distillate fuel also fell, dropping 3.4 million barrels to 124.6 million barrels -- about 2 percent higher than a year ago, but in the lower half of the average range for this time of year.
Natural gas fell about 42 cents to settle at $13.103 per million British thermal units after the EIA reported a buildup in US natural-gas storage of 58 billion cubic feet in the week ending Oct. 7. At 3 trillion cubic feet, natural-gas inventories are still about 5 percent lower than a year ago.